Bradford & Bingley fell 16 per cent to a new low of 112p as investors shied away from it against the forthcoming dilutive rights issue.

The price is now well below the 129p price implied by its planned issue of 16 new shares at 82p for every existing 25. This means that the underwriters – Citigroup and UBS – could struggle to offload the new paper.

The mortgage lender specialises in self-certified and buy-to-let mortgages, which are seen as particularly exposed to a fall in house prices. Last week Sandy Chen, of Panmure Gordon, set a price of 85p on B&B, saying that he was concerned that it intends to use some of the cash to expand even further into the risky buy-to-let sector. The proportion of its customers who are three months behind on mortgage payments is at a record high.

The imminent blizzard of new bank paper was weighing on the sector. Royal Bank of Scotland fell another 10½p to a seven-year low of 256p ahead of its £12 billion issue. HBOS, which has £4 billion of paper to sell, slipped 6¾p to 462½p. Alliance & Leicester, yet to commit to a rights issue, closed down 10¾p at 430¼p.

The FTSE 100 closed up 72.2 points at 6,376.5, however, buoyed by mining stocks and stronger-than-expected American economic data.

British Airways fell 10¼p to 219¼p after Deutsche Bank and ABN Amro cut their ratings to “sell”, with a 200p target, after Willie Walsh, BA’s chief executive, issued a grim outlook statement last week. Chris Reid, of Deutsche, said that passengers would not pay extra for fuel and Mr Walsh needed to cut the size of the fleet.

“BA must resize its business or hope competitors resize theirs,” Mr Reid said. “Until either scenario occurs, we see only downside risks.”

At the weekend Mr Walsh confirmed that he would keep some aircraft on the ground this winter. Other airlines could follow suit. This would be bad news for Rolls-Royce, which makes money servicing airline engines, but it rose ¼p to 439½p, nevertheless, after it talked of growing demand over the next 20 years.

Citigroup boosted the mining sector by raising its target on Anglo American to £40 and on Vedanta Resources to £30.61. Both closed at a record high. Vedanta was the top performer, up 219p at £27.80, whileAnglo American rose 140p to a new high of £36.80.

Kazakhmysrose 110p to £19.43 after Jeremy Gray, of Credit Suisse, raised his target from £23 to £27 to reflect expectations of copper demand outstripping supply and its recent purchase of Kazakhstan’s biggest power station, which, he said, “could prove a master stroke”.

Wolseley fell 21p to 558p as Merrill Lynch said that a rights issue would have to be very big to remove worries about bank covenants.

Aquarius Platinum, the South African miner, rose 77½p to 920p after the chief executive of Mvelaphanda Resources, a rival platinum miner, said that a merger would make sense. Genus, the agricultural biotech group, rose 20½p to 888½p amid talk of a bid.

— New York: Stocks had a mixed day after weakness in the technology sector took the edge off enthusiasm over an economic report that suggested the US economy could still be growing. The Dow Jones industrial average closed up 41.40 points at 13,028.20.

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